How Medicare could see a cut thanks to the Republican tax plan

The tax plan House Ways and Means Chairman Kevin Brady and Republicans are pushing could trigger cuts to Medicare and other programs if Congress doesn’t act.

The tax plan that congressional Republicans and President Donald Trump are pushing may do more than cut taxes — it could also cut spending for programs including Medicare and student loans.

Here’s why: Budgetary rules known as statutory paygo (short for pay-as-you-go) call for automatic spending cuts if Congress enacts bills that have the net effect of increasing the deficit by the end of the year.

The Senate is debating its bill Thursday, with a vote coming perhaps late in the day or early Friday. The House has passed its version, and the two chambers must agree on a single measure to send to Trump.

Republicans are permitted under Senate rules to add no more than $1.5 trillion to the deficit over 10 years through their tax bill. That figure, says Ed Lorenzen of the Committee for a Responsible Federal Budget, means there would be automatic cuts of up to $150 billion a year over a decade.

That’s if lawmakers don’t strike a deal before automatic cuts take effect, something Lorenzen notes they have done in the past, such as with the Bush tax cuts in 2001.

Say Congress does pass the tax cut before the end of the year, with paygo rules remaining in effect. Medicare alone would be cut by $28 billion next year, the CRFB has estimated, and mandatory funding for student loan administration, agricultural subsidies and customs and border patrol operations would be cut entirely. Customs and border patrol would still get discretionary funding through the congressional budget process, however.

The Congressional Budget Office has released its own estimate, showing similar results. Medicare would be cut by $25 billion if Congress doesn’t find a solution, according to the nonpartisan CBO.

Social Security is exempt from the automatic cuts.

Overriding the automatic cuts can be done, but as Lorenzen told MarketWatch, it would take 60 votes. That means some Democrats would have to join Republicans, since the GOP controls the Senate with 52 seats.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.